DiNapoli: If Cuomo Borrows More for the MTA, Get Ready for Fat Fare Hikes

Without a commitment from the state to close the $15.2 billion gap in the MTA’s capital program, the cost of a MetroCard is likely to spike as the MTA adds to its cumbersome debt load, according to a new report from Comptroller Tom DiNapoli [PDF]. The warning comes as Governor Andrew Cuomo and the legislature begin the very early stages of negotiations over funding the capital plan, which maintains, upgrades, and expands the transit system.

MTA debt has skyrocketed and without new revenue, it will consume even more of the agency’s budget. Does Cuomo care? Photo: MTA/Flickr

By some measures, the MTA is doing well: Ridership is reaching new highs, the authority is making progress on cost savings, and an improving economy has buoyed its finances. But there’s trouble around the corner: Labor and health care expenses are already rising faster than the MTA can pay for them even as new labor deals pile on more costs, federal funding is questionable, debt is at record levels, and the next capital plan is only halfway funded. Without new sources of revenue, issuing more debt to pay for system upkeep and expansion will translate into more fare hikes.

The authority is already planning on issuing $6.2 billion in debt for the next capital plan. Even with that borrowing, there’s still a $15.2 billion gap. Without action in Albany to bring in new revenue, the MTA will likely do what it did last time: Cut the capital program while issuing even more debt. That means fare hikes.

Fares are already scheduled to increase faster than inflation, with back-to-back four percent hikes scheduled for 2015 and 2017. If the MTA has to issue more debt to pay for the capital program, DiNapoli calculates that riders should expect an additional 1 percent hike for every $1 billion borrowed.

MTA debt is already set to exceed $39 billion by 2018, according to DiNapoli, more than double the amount in 2003. Servicing that debt consumes an ever-greater share of the MTA’s operating budget, which is already squeezed by rising labor and health care costs. Who pays? Transit riders, who have to deal with higher fares and suboptimal service, as the agency spends more on interest payments and less on running trains and buses.

Adding more debt could also threaten the authority’s bond rating and ability to borrow down the road. Avoiding that scenario would likely require new revenue sources. Transit advocates are backing the Move New York plan, which adds tolls to crossings into the Manhattan business district while reducing them on outlying bridges. While the de Blasio administration hasn’t ruled it out, Cuomo has been far cooler to the idea.

Yesterday, Cuomo offered a glimmer of hope. “I think everything is on the table, from my point of view. And that’s where the conversation should start, with all options,” he told Capital New York. MTA Chairman and CEO Tom Prendergast, a Cuomo appointee, has urged the creation of new funding sources instead of an increasing reliance on debt. Can Cuomo actually lead on transit? We’ll see in the months ahead.

Cuomo represents the worst of both worlds when it comes to his political approach to transit. He takes a more Republican stance on funding, constantly raiding the MTA budget and generally seems to disdain transit. But when it comes to cost cutting to bring down the outrageous price of transit construction in the city he acts like a Democrat and bows down to the labor unions, allowing them to continue over staffing capital projects by as much as 4 times.

Larry Littlefield

“Fares are already scheduled to increase faster than inflation, with back-to-back four percent hikes scheduled for 2015 and 2017.”

Well 2.0% is the Feds target rate for inflation, though we’ve been coming in below that. The problem is most workers pay has trailed inflation. Public employee union contract wage increases have exceeded inflation. And benefit costs have risen far faster.

“MTA Chairman and CEO Tom Prendergast, a Cuomo appointee, has urged the creation of new funding sources instead of an increasing reliance on debt.”

No transit agency has more dedicated revenue sources than the MTA already. The problem is, those existing revenues are going to past debts. If only enough revenue is raised to service another $15 or $20 billion in debt, we’ll be right back where we are — with another revenue source gone — in just five years.

Larry Littlefield

He hasn’t covered himself with glory on this issue. But all the other Governors since Cuomo (Mario!) have been worse…except for David Paterson. Who raised revenues and put in someone who really fought to cut costs? He did.

(No, Im not saying vote Republican, Im saying vote for the parties that actually support transit)

Bolwerk

At least categorically, there literally are none. Even WFP has an anti-transit streak, and it’s not unheard of for Greens to confuse green and greenwashing.

Bolwerk

Republikans spend more the Democrats. To add to the irony of Larry’s point, Pataki (who defeated Mario) arguably ballooned MTA debt more than anyone.

dporpentine

I think your main point is absolutely right but I think saying “WFP has an anti-transit streak” might be on the too-generous side. They really don’t give a crap about anything other than paycheck issues. They don’t even have transportation on their issues list:http://workingfamilies.org/issues/

You and I both know that any reasonable definition of “paycheck issues” would include transit. But for them it’s messy since you can’t talk about transit in New York without talking about the MTA and you can’t talk about the MTA without talking about pay and benefits. Hence, silence. Hence, post-Cuomo-endorsement, absolute loss of any progressive credentials.

And the Greens are just ridiculous, I’m sorry to say.They’re the “candy for everybody” party. Pure political masturbation.

Alex

You’re both right. Both parties love to spend, spend, spend and rack up tons of debt in the process. It’s a matter of the difference in WHAT they want to spend the money on.

Alex

I’d say vote for CANDIDATES that actually support transit. Transit just isn’t a top-tier issue for political parties beyond platitudes of “making your commute easier”. And I’m completely biased here given this is a pet issue for me, but I really believe a politician who actually gets transportation tends to be pretty solid on a range of issues. They’re able to understand both social and financial facets of policy which tend to be especially complex with transit.

Bolwerk

Heh, yeah. That “paycheck issues” thing drove them to either sit out or actively oppose CP, basically giving them a hand in fucking most of NYC’s workers. WFP is practically a conservative party in the original sense of the word. It just happens to represent the 2% ? n ? 5% rather than the 1%.

niccolomachiavelli

Well, I guess it is settled then, fund the capital plan by cutting wages and benefits for workers and retirees.

Bolwerk

Is it even possible to cut for retirees?

Chris Peplinski

I think the problem is the mta keeps borrowing money they dont have and when they leave to the taxpayers to keep them out of debt,

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